FDIC Law, Regulations, Related Acts

4000 - Advisory Opinions

This letter is in response to your October 31, 1994 letter to Ms.
Josi Tucker of the FDIC's Division of Compliance & Consumer Affairs,
which was forwarded to me.

Based on your correspondence, it is my understanding that Bank
maintains custodial accounts (mortgage servicing accounts) on behalf of
the Federal National Mortgage Association, Federal Home Loan Mortgage
Corporation and Government National Mortgage Association. Bank, as a
part of its fiduciary obligation, maintains separate principal and
interest ("P & I") and, taxes and insurance ("T & I") bank
accounts for the collection of the remitted mortgage payments. Bank
deposits the principal and interest portion of the mortgage payments
into the P & I account, while the escrow portion of the payment is
deposited into the T & I account. As the mortgage servicer for numerous
mortgagors, Bank collects and disperses the tax and insurance payments
from mortgagors when due. You request clarification on how the FDIC
insures mortgage servicing accounts.

As you may be aware, part 330.6(d) of the FDIC's regulations, 12
C.F.R. § 330.6(d), provides:

Accounts maintained by a mortgage servicer, in a custodial or
other fiduciary capacity, which are comprised of payments by mortgagors
of principal and interest, shall be added together and insured in the
amount of up to $100,000 for the interest of each owner (mortgagee,
investor or security holder) in such accounts. Accounts maintained by a
mortgage servicer, in a custodial or other fiduciary capacity, which
are comprised of payments by mortgagors of taxes and insurance premiums
shall be added together and insured in the amount of up to $100,000 for
the ownership interest of each mortgagor in such accounts.

Accordingly, the FDIC provides insurance coverage of up to and
interest payments ("P & I payments") on a per owner (mortgagee,
investor or security holder) basis. The FDIC also provides insurance
coverage of up to $100,000 for mortgage servicing accounts comprised of
tax and insurance premium payments ("T & I payments") on a per
mortgage borrower (mortgagor) basis. Since these accounts are custodial
in nature, part 330.6(a) provides that the principal's interest in
these types of accounts will be aggregated with any individually owned
(single ownership) account(s) that the principal may have at the same
insured depository institution.

Thus, if an individual owner has interests in more than one mortgage
account held in Bank P & I account, those interests would normally be
aggregated and insured for up to $100,000. In addition, if an owner
maintains single ownership accounts, or corporate accounts if the owner
is a corporation, at American Savings, the owner's interests in the P &
I account would be aggregated with those other accounts for deposit
insurance purposes.

With respect to the T & I account that Bank maintains, the FDIC will
provide up to $100,000 insurance coverage for the interest of each
mortgagor. However, if an individual mortgagor has interests in more
than one mortgage account held in Bank T & I account, those interests
would be aggregated for insurance purposes. Moreover, to the extent
that a mortgagor maintains single-ownership accounts at Bank, the
mortgagor's interests in the T & I account would be added to those
single ownership accounts at the Bank, prior to applying the $100,000
insurance limit.

In summary, each mortgagee's interest in P & I account and each
mortgagor's interest in T & I account held at Bank in mortgage
servicing accounts would be separately insured for up to $100,000.
Should either the mortgagors or mortgagees have single ownership or
corporate accounts at Bank, these accounts would be aggregated with the
mortgagors' and mortgagees' respective interests in all mortgage
servicing accounts held at Bank and insured for up to $100,000.

I hope this is fully responsive to your questions. If you have
additional questions or comments, feel free to call me at (202)
898-7049.